U.S. Futures Gain, Yen Weakens

October 05, 2010, 7:27 AM EDT By David Merritt

Oct. 5 (Bloomberg) -- U.S. stock-index futures and most European stocks rose amid speculation that central banks will keep stoking economic growth as the Bank of Japan cut interest rates and pledged asset purchases. The yen weakened, while gold and tin reached records.

Futures on the Standard & Poor’s 500 Index gained 0.3 percent at 12:10 p.m. in London, while the Stoxx Europe 600 Index advanced 0.1 percent, snapping six days of losses. The yen weakened 0.6 percent against the euro. Australia’s dollar depreciated 0.9 percent against the U.S. currency after the nation’s central bank unexpectedly kept its main interest rate unchanged. Gold climbed to $1,328.25 an ounce, silver reached a 30-year high and tin rose to as high as $25,800 a metric ton.

The Bank of Japan’s decision to create a fund to buy bonds and other assets comes as policy makers in the U.S. and the U.K. consider similar steps to support their flagging economies. European services and manufacturing slowed last month and retail sales unexpectedly declined in August, industry and government reports showed, adding to signs the recovery is losing momentum amid budget cuts. Greek stocks rallied as Moody’s Investors Service said it’s “impressed” by steps to overhaul the nation’s public finances.

“A new round of quantitative easing is likely,” Paul McCulley, a portfolio investor at Pacific Investment Management Co., wrote on the company’s website. “The bottom line for the U.S. is a growth trajectory so slow you’d nearly call it stalled.”

Buy Assets

The yen fell against 13 of its 16 most active peers, the Nikkei 225 Stock Average climbed 1.5 percent and yields on 10- year Japanese notes matched a seven-year low after the Bank of Japan cut the overnight call rate target to a range of 0 percent to 0.1 percent, the lowest level since 2006, from 0.1 percent. Policy makers will set up a 5 trillion yen fund to buy government bonds and other assets.

The Aussie dropped against all 16 of its most-traded peers, weakening 0.9 percent to 79.95 yen. Reserve Bank of Australia Governor Glenn Stevens kept the overnight cash rate target at 4.5 percent, as forecast by six of 25 economists surveyed by Bloomberg News. South Korea’s won weakened 0.5 percent versus the dollar after the government said it will audit banks’ foreign-exchange trading, spurring concern policy makers will step up efforts to curb the currency’s appreciation. Brazil doubled a tax it charges foreigners on investments in fixed- income securities yesterday to limit capital inflows.

Euro, Swiss

The euro appreciated 0.6 percent to $1.3769 and strengthened 0.4 percent to 86.78 U.K. pence. The Swiss franc climbed to a record against the dollar for the second consecutive day, jumping 0.6 percent to 96.57 centimes.

Almost two stocks rose for every one that fell on the Stoxx 600. EFG Eurobank Ergasias led a rally in Greek banks, climbing 3.3 percent. Banco Santander SA, Spain’s biggest lender, gained 1.2 percent. TUI Travel Plc, Europe’s largest tour operator, surged 4.3 percent after saying bookings for this winter have improved. E.ON limited gains, falling 1.8 percent as HSBC Holdings Plc and Banco Santander SA cut their recommendations on Germany’s largest utility.

The gain in U.S. futures indicated the S&P 500 may pare yesterday’s 0.8 percent decline. Apple Inc. rose 1 percent in Germany after Jefferies & Company Inc. advised buying the shares. Chevron Corp., the second-largest U.S. oil company, climbed 1 percent after saying it will start buying back its stock at a rate of $500 million to $1 billion a quarter as it continues investing in petroleum projects.

Default Swaps

The 10-year U.S. Treasury note yield fell 2 basis points to 2.46 percent, while the yield on similar-maturity Japanese securities reached 0.895 percent, matching a seven-year low set in August.

Credit-default swaps insuring European government debt rose. Contracts tied to Portuguese bonds climbed 5 basis points to 412, Ireland was up 7 basis points to 442.5, Italy increased 3 basis points to 198, Greece added 5 basis points to 744.5 and Spain was 2 basis points higher at 229.5 from 227, according to data provider CMA.

Silver rose as much as 1.4 percent to $22.2625 an ounce, the highest price since Sept. 24, 1980. Crude oil climbed 0.7 percent to $82.04 a barrel on the New York Mercantile Exchange.

Turkey’s ISE National 100 Index advanced 0.7 percent to a record and yields on benchmark two-year lira bonds fell 6 basis points to 7.97 percent, the lowest level since October 2009. Moody’s Investors Service changed the outlook on Turkey’s Ba2 local and foreign-currency government bond ratings to “positive” from “stable,” saying the economy has returned to pre-crisis levels and debt management improved.

--With assistance from Michael Shanahan, Paul Armstrong, Daniel Tilles, Claudia Carpenter and Michael Patterson in London. Editors: Justin Carrigan, Paul Sillitoe

To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

View the original article here